You’ve just driven off the lot in your brand-new car, and life is good. But what happens if, a few months down the road, your car is totaled or stolen? The value of your vehicle drops the moment you drive it off the lot, and this is where gap insurance can be a real lifesaver. At Payne Insurance Group, we’re here to break down the ins and outs of gap insurance and help you decide if it’s worth it for you.
What Is Gap Insurance?
Gap insurance, also known as Guaranteed Asset Protection, is designed to cover the difference—or “gap”—between what you owe on your car loan and the car’s actual cash value (ACV) at the time of an accident or theft. Simply put, if your car is totaled, your standard auto insurance policy will pay out the current market value of your vehicle, not the amount you still owe on your loan. If there’s a gap between those two amounts, gap insurance kicks in to cover it.
When Is Gap Insurance Worth It?
Not everyone needs gap insurance, but here are some scenarios where it could be a smart choice:
- You Made a Small Down Payment: If you put down less than 20% when buying your car, you may owe more than the car is worth for a while. Gap insurance can protect you from having to pay out of pocket if something happens to your vehicle.
- You Have a Long Loan Term: Financing your car for more than 60 months? The longer your loan, the slower you build equity, which could mean a significant gap if your car is totaled early on.
- Your Car Depreciates Quickly: Some cars lose value faster than others. If you’re driving one of those vehicles, gap insurance can be a valuable safety net.
- You Rolled Over Debt from a Previous Car Loan: If you added the remaining balance of an old car loan into your new one, you could easily owe more than the car is worth.
When Gap Insurance Might Not Be Necessary
If you made a substantial down payment or paid cash for your car, you likely won’t need gap insurance. Also, if you’re close to paying off your loan, the gap between what you owe and what the car is worth is probably minimal.
How to Get Gap Insurance
Gap insurance can often be purchased through your auto dealer, but you might find better rates by adding it to your existing auto insurance policy with Payne Insurance Group. We’ll help you explore all your options to make sure you’re fully covered at a price that works for you.
Is Gap Insurance Worth It?
In short—if you’re in one of the scenarios above, gap insurance can save you from a financial headache. No one likes to think about worst-case scenarios, but being prepared can make all the difference. At Payne Insurance Group, we’re committed to helping you protect your investments and your peace of mind.
Ready to talk about whether gap insurance is right for you? Give us a call or visit us at any of our locations. We’re here to make sure you drive off with confidence, no matter what life throws your way. 🚗💼
Payne Insurance Group—Protecting You and What Matters Most!
